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Tom Baca: Consumers need state's protection from predatory lenders

By Tom BacaGuest Column

Posted:
05/23/2014 10:04:00 PM MDT

During the most recent legislative session, Catholic Charities of the Diocese of Las Cruces called on the New Mexico Legislature to adopt Senate Joint Resolution 20. The resolution would have allowed voters to decide whether the state's Constitution should be amended to cap interest rates on consumer loans at 36 percent.

The church's stance on this issue is not about "politics" or even "economics." Our stance is neither conservative nor liberal. Rather our stance is rational and compassionate. Those two words together are not an oxymoron. Our position is about "righteousness" and "fairness" especially when it comes to the underprivileged who find themselves forced into the dark and shadowy corners of loan predators pretending to be angels of light.

They come as wolfs in sheep's clothing, predating on the weakest. And so, the somewhat unsuspecting prey has no prayer. The typical victim is bound by their circumstance to have no option but to see the cubic zirconia ahead as if it were a real diamond. In the end, they will pay the value of a diamond and get a lump of coal instead. What they are buying is time with extorted hopes in the shape of low minimum monthly payments. These hopes are false hopes of eventually paying back the principal. Minimum payments are made so attractive that what looks like financial relief and freedom ends up being a store front for a kind of debtor's prison.

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Because of a desperate situation in their lives, "but for" such a loan, the victims would be evicted, or could not buy medications, or have their utilities cut off, or would not have the money to bury a loved one. Or perhaps they have poor credit with the regular financial institutions in the area for lack of sufficient income sources. Among the victims are elderly, disabled, and single-parent families.

The typical response given by the industry is that because of the "high risk" they need the higher rates as assurance. But poor credit is not a justification for interest as high as 2,700 percent. Average rates hover around 400 percent.

It is for this reason that Jesus turned over the tables of the money changers in the temple. It was not so much because Jesus was anti-marketplace or freedom for people to choose, but that the money changers were charging unwarranted surcharges for animals meant for sacrifice and people were cornered into a situation wherein they felt forced to pay up or not abide by the holy law. Jesus was upset that this was a scar and scandal upon that which was supposed to be a holy event at Passover.

Very much like the money changers event as written in the Bible are the violations of personal integrity by the new modern money changers. In their greed, they know that customers actually "pay" their monthly minimum payments. Unfortunately, the minimum payments never pay off the debt owed.

Our proximity to the border worsens the situation in Las Cruces alone with 43 such institutions. There are fewer "pawn" shops than there are these loan sharks. These loans take the form of installment loans, payday loans, refund anticipation loans, and title loans. I have seen many single-parent families who end up at our doors because they cannot pay rent or utilities have just lost their jobs and feel forced to go to the predatory lenders only to worsen their situation.

It is not in the public interest to allow businesses to charge interest rates and fees that virtually assure a cycle of debt and poverty for the most vulnerable. "Caveat emptor" is not enough. Usury has always been a violation of the Catholic Church's basic teachings. The inviolable human dignity of each individual is threatened when our society allows "faceless" and dare I say "soulless" businesses to exploit the poor and the vulnerable.

Pope Francis reminded us recently of the church's teachings on usury by stating, "When a family doesn't have enough to eat because it has to pay off loans to usurers, this isn't Christian. It's not human." We urge the citizenry to take note and be a participant in endorsing public policy in local and state government that disallows predatory lending and supports educational initiatives that help people understand financial literacy. Talk to your City Council and state legislators. It is time to overturn the tables of the money changers.

Tom Baca , M.P.A., is director of Catholic Charities of the Diocese of Las Cruces.